Technology service providers are entering a golden age

Technology service providers are entering a golden age

At the onset of the pandemic, most companies put their most sophisticated digital transformation efforts on hold while accelerating the launch of cloud services, tightening security, and implementing remote work scenarios.

Since then, many of these companies have restarted their strategic projects recognizing that they must continue to progress to remain competitive. But the virus has produced at least one important side effect that is sure to hit every digital transformation rollout: i.e., who will do the work?

Knowledge gaps caused by employee burnout, disillusionment, and job turnover are barriers to much-needed digital evolution. Add to that a gummy supply chain and the rush for cloud services from even the slowest-to-adopt companies, and the result is the current boom in digital transformation technology service providersIT consultants and VARs.

The exact mix of skills that service providers will provide, however, remains to be determined. The shift to strategic and transformative projects has increased the demand for IT professionals with expertise. Those who have work, have work up to their eyes. The Enterprise Architect (EA) might be positioned to provide a big picture perspective on these ambitious IT initiatives, but some industry watchers wonder if customers will engage such people.

Glory days for consultants, VARs and digital transformation service providers

Just a few years ago, companies may have viewed partners differently, as mere service providers. Everything was fine as long as they met service level agreements, said Forrester Research analyst Gordon Barnett. Now their role has expanded.

“Now we are moving to a partnership model where there is shared responsibilityespecially as we transition to lighter organizations,” Barnett said. The work has moved from initial strategy through migration and deployment, and continues through the operational phase.

Elizabeth Costerisan

Indeed, business is booming at Continental Resources (ConRes), an MSP based in Bedford, Mass. According to Elizabeth Costerisan, director of strategy and services at ConRes, the MSP would have had its best year ever, had it not been for the supply chain issues.

“Managed Services, professional services and CX Groups are exploding in terms of revenue and profitability,” she said. “Revenue is up 230 percent.”

And Costerisan herself has observed that her business becomes more integral to a client’s day-to-day operations. “They can’t retain talent, can’t use tools,” she said. “They trust us. We all know the pitfalls.”

People with infrastructure experience can be the hardest skills to find in the open job market, and this scarcity has only accelerated during the pandemic.

“Nobody wants to be the Cisco switch manager, or the NetApp storage manager, or the F5 firewall manager,” said Rob Strechay, senior analyst at ESG, an analytics firm in Newton, Mass. ESG is a division of TechTarget.

VARs and other IT consultants can keep a bench of people who can be spread across different organizations, Strechay added. “They can keep the infrastructure running while businesses move up the stack to the application layers and the integration layers to tie these things together.”

Spending on technology service providers is on the rise

Forrester, the Cambridge, Mass., market research firm, recently released its Global Technology Outlook research, which expects technology outsourcing and consulting to grow 8% in 2022. The report says also that computer services will increase this year by 6.8%. This growth spurt is significantly faster than pre-pandemic levels and driven by both digital and cloud investments and 2021 momentum, the company said.

Forrester also surveyed 1,550 technology services companies and decision makers in 2021 about their use of technology service providers, management consultants, vendor services and business process contractors in 2022.

Forrester said 76% of those companies will use technology service providers this year. About 71% of organizations will pay for the expertise of a management consulting firm. 70% said they would use the professional services of a VAR and 65% said they would use a business process outsourcer. Forrester does not track year-over-year comparisons because the survey does not always include the same companies.

Additionally, some of the largest IT consulting firms said they exceeded last year’s growth targets, largely due to spending by technology service providers and general outsourcing.

  • Tata Consulting Services posted a third quarter with 14.4% year-on-year growth. In particular, the management consulting firm cited consulting and service integration with a focus on digital transformation and accelerating the adoption of cloud platform services.
  • Accenture’s first quarter results ending in November showed a 27% increase in revenue compared to the same period last year. The company reported a 30% increase in new bookings compared to the same quarter last year.
  • Infosys said its digital business grew 34% year-on-year in the fourth quarter, accounting for 51.5% of overall business.
  • Capgemeni Group said its digital and cloud services grew 14.6% in fiscal 2021, largely driven by major digital transformation projects.

The resurgent EA?

If the outsourcing of strategic tasks is so widespread, could there not be role for EA? It’s not so clear. In recent years, as companies shifted their focus to tactical tasks, the role of EA has diminished. Whether or not the pendulum will swing back is up for debate.

As companies refocus on large-scale change, they need individuals who can look across the entire organization. Mark Hanson, chief architect at Ahead, a Chicago-based cloud consulting firm, does in-house development for external services and interfaces with cloud customers. According to Hanson, the role of EA is always focused on developing strategies and aligning business and technology.

in a world where you have a lot of dynamic changes, [enterprise architects] need a good friend and partner.

Mark HansonChief Architect, Ahead

“There’s a lot under the hood,” he said. “Roadmaps, strategic direction. And in a world where you have a lot of dynamic change, [EAs] need a good friend and partner.”

Jason Baragry plays a similar role as Chief Enterprise Architect, but at Ardoq, a Norwegian company that makes a data collection tool for enterprise architects. Baragry’s role is to research customers, study trends, consult and ultimately feed information back to the product development team.

People need information about what their colleagues are doing, and for that to succeed, they need tools that offer information in a professional context so that non-IT people can use it. “The trend I see is to democratize decisions,” he said.

This can create a situation where a tool may be used by a business user but then passes information to an IT consultant.

ConRes’ Costerisan said that while it may depend on the vertical market, she primarily sees subject matter experts who manage technology areas, such as networking, security or cloud.

“You need tools that give visibility,” she said. “But having the job of architect is no longer the real world.”